Surgut without its gilding of “black” gold. Some anti-myths about the “oil Eldorado"

Olga Myasnikova
30 October 2008

"You sit there on your oil wells, you don't do anything but make money. You don't want to share anything with the rest of Russia and you don't." This tirade often comes from "the man in the street", but when I heard it from a university lecturer in political studies, I have to admit I was puzzled.

I won't, of course, take issue with the obvious fact that the northern regions are richer than the subsidised regions, and State Statistical Committee figures show that the salary levels in my native Surgut are not much lower than in Moscow (27,000 rubles/$1080 compared with 29,000 rubles/$1160) and much higher than in Skt. Petersburg (14,000 rubles/$560). Any visitor to Surgut is amazed by the active social and economic policy of the authorities: the roads are repaired every year, children receive free meals at school, and there are social programmes - for example, there is aid for single mothers, and also for former drug addicts. All orphans go to Greece for their holidays once a year, and at the age of 18 they receive one-room apartments and 400,000 rubles for repairs.

The reality under this shiny surface is quite different, although people who live a long way from the "oil-producing paradise" are unaware of this.

Super profits and super expenses

To start with price levels.   For greater clarity I will take the example of a fairly typical Surgut resident - my friend Irina, a single mother of a 12-year-old child. Irina's average salary is 26,000 rubles/$1040 a month, i.e. practically the average for Surgut.

Utility bills are the first item of obligatory expenditure. In August, she had to pay 6,921.43 rubles/$276.86 for a two-room apartment where three people are registered. And this is far from being the highest payment for housing. My former literature teacher pays around 12,000 rubles/$480 for a two-room apartment, i.e. almost as much as it costs to rent an apartment in St. Petersburg.

Out of the remaining 19,000 rubles/$760, Irina spends from 5,000-6,500 rubles/$200-240 on petrol. Despite the abundance of drilling rigs and the condensate stabilisation plant, which produces petrol, fuel prices in the city are unjustifiably high: according to my latest information, 26 rubles/$1 for a litre of  92 octane fuel. Thus, Irina has 13,000 rubles/$520 left. White bread in Surgut costs 25 rubles/$1, ten "select" eggs cost 54 rubles/$2.16, a litre of milk costs 46 rubles/$1.84, a kilo of Russian cheese costs 250 rubles/$10, and a kilo of tomatoes (the cheapest kind) costs 270 rubles/$10.87. May the Surgut Meat Processing Plant live long and prosper, for it provides relatively cheap products to the city - 110 rubles/$4.40 for a kilo of chicken and 210 rubles/$8.40 for a kilo of "Doctorskaya" sausage. It is said that the minimum food basket in Surgut is 4,800 rubles/$192. But you wonder who can live on this minimum, If a family of two people in Surgut spends less than 11,000 rubles/$440 a month on food, they will simply starve.

To all of this we must add expenditure on clothing, especially winter clothing, household appliances, medicine etc.  In other words, our northern salaries are easily eaten up by our northern prices. And another thing about "Surgut super-profits": average salary calculations for the region include the oil-workers, whose income, even by northern standards, is very high. For example, a school-friend of mine, who works at Surgutneftegaz as a technical translator from the Japanese, receives an average of 300,000 rubles/$12,000 per month. Granny Shura, my mother's neighbour, washes floors at a school for 7,000 rubles/$280. Workers on the rigs receive around 50,000 rubles/$2,000. Working conditions are extreme: two weeks in the deep taiga (the drilling rigs can usually only be reached by air), and the whole working day spent in the cold, at a temperature of minus 50 degrees. Plus a complete lack of communications - there are no mobile networks in the taiga...

Drunk with boredom

According to data from the city administration, the main problem that concerns the majority of Surgut residents is the drug addiction in the city. The head doctor of the clinical psycho-neurological centre (PNC), Sergei Smerdov, is optimistic, however. In an interview with the medical journal "Who's who in medicine", he said: "There were especially high levels of drug addiction here in 1999-2001. But whereas in 2000, 292 people per 100,000 suffered from drug addiction in Surgut (six times higher than the average for the Russian Federation in this period - O.M.), at the end of 2006 the figure was only 22. Many people have been cured. Today the level of addiction is more than 10 times lower. The main thing is that many fewer children are involved: in Surgut there are currently 4 young people under 18 who have a drug problem... The number of occasional users is higher than this, of course."  

The doctor's comforting words are somewhat disingenuous. If we're talking about addicts registered at the PNC in 2000, then almost all of them are not cured, but dead. According to PNC data, from 400 to 1,000 people die of overdoses in the city every year.  City Health Committee figures show that in 2000 the main clients of the PNC were on hard drugs, i.e. heroin. Today in Surgut, dealers mainly specialising in synthetic drugs and marijuana are flourishing. Overdoses from these drugs are not as common, so users rarely end up at the PNC - and the statistics have "improved". However, from personal experience of talking to the youth of Surgut, I can say that many young Surgut residents do not even consider LSD, speed, cocaine and marijuana to be drugs. They use them as "sedatives". It is true that child drug addiction really has dropped in Surgut in recent years, but...  A study by sociologists at the NGO "New Generation" showed that in 2001 617 minors (under 12) were drug addicts and 132 had alcohol addiction problems, whereas in 2007 82 minors used drugs, but 436 regularly drank spirits. So schoolchildren, who have realised that drugs can kill, have replaced heroin with vodka. The law-enforcement bodies have recorded an increasing number of crimes committed by minors under the influence of alcohol. According to data from the Surgut police department, in 2007 there were 130 such crimes, compared with 24 in 2001.

The reasons for the widespread teenage addiction to alcohol and drugs are not particularly original: peer group influence, trouble at home and a desire to escape from problems. But there is another important factor - boredom. In Surgut there is virtually nothing for young people to do. This particularly affects the children.

Most sport groups and extra-curricular education centres charge fees. Teenagers who are in the so-called risk group simply cannot afford them. The free groups, art schools and dance studios have long since fallen into disrepair, or simply vanished. What can you say if a city where there is snow for 8 months a year only has two open-air ice-skating rinks?  The construction of an indoor ice-skating rink is only at discussion stage. And has been for the last eight years...

For just one example, take my sports school № 4.  In the mid-90s, it trained sportspeople of all age groups: it had 17 departments and a gymnasium. In 2003, the city administration passed a decision to disband the school (only four departments were left by that time) and turn it into a health complex. The children's groups were closed, and the building is practically empty - only the gymnasium and a yoga class are functioning. But they have opened a solarium...

There is almost nowhere for children to go after school. Some schools organise hobby groups, trying to "get children off the street". But just remember how you felt in the "best years of your life" and ask yourself: after five hours at their alma mater, would many schoolchildren want to spend even one more hour there? So children are doomed to wander the streets.

In general, it's not only the children that have a tough time with cultural activities. The city has only one music and drama theatre. It started unbelievably confidently - it immediately attracted fans, and in 2002 won the "Young Generation" young theatre competition, outdoing even some Broadway theatres. But for four years now, the repertoire at the Surgut theatre has been the same. The good actors have moved to television or left for Moscow.

There are also two cinemas in the city, though they have an incredibly boring selection of films. I especially remember July last year. I decided to go to the Avrora cinema in Surgut, and was surprised to discover that for two weeks, from 10 a.m. to 7 p.m., all they were showing was "Harry Potter". And at 10 p.m. they showed a horror film. The "Mir" cinema does try to change the programme every week, with 2-3 new films. But there is simply nowhere to watch art films, except on home video.

And so there is only one thing to do in Surgut: make money...

A city with a flickering history...

And finally, to address the claim that we "don't share with the rest of Russia". Russian oil is produced almost entirely in Siberia, including in the Surgut region, but over the last five years the tax burden of oil-producing companies has been increased several times. Firstly, allocations for the replacement of the mineral resources base were abolished. The state thus reduced the finance for geographical exploration of new fields (from 18 billion/$72 million to 6 billion rubles/$24 million per year), shifting this obligation to companies.

Secondly, special rules were established for taxing the extraction of subsoil resources for oil. The per-ton rate was "pegged" to world oil prices. Thus, when the price of 1 barrel reaches the level of $85, the co-efficient rises to 8.0! With the current base rate of 419 rubles/$16.76 per 1 ton of oil produced, the mineral extraction tax comes to (419 x 8.0) 3352 rubles/$134 per ton. Thirdly, export customs duties on oil were drastically increased. In fact, the Russian Federation is the first country in the world to introduce customs duties on oil. They were introduced in 1999, but until 2002 the rate was low - from 2 to 30 Euros per 1 ton. Since 2002, the system for calculating duties has also been pegged to world oil prices. From 1 April 2006, the level of export duties on oil has been $186.5 per ton, or 4,662 rubles (at the rate of 25 rubles to the dollar). According to the magazine "Industrial Journal", under the new tax conditions the net profit of a company is only 10%. It was by increasing taxes for oil producing companies that the government  was able to reduce rates for several other taxes (VAT, profit tax, consolidated social tax etc.)

The new tax system has done the most damage to small oil-producing companies which mainly sell oil on domestic markets, where the prices are much lower than world prices. Pegging taxes to international prices has proved ruinous for these firms.

Surgut residents have also suffered from the "tax squeeze": oil workers' salaries have dropped, there has been a general deterioration in the economic situation in the city, and worst of all there is the fear that soon social programmes may be abolished. The entire city lives off the taxes from Surgutneftegaz, which at the moment go almost entirely to Moscow.

Surgut has the unofficial title of "oil capital of the Russian Federation". But this is a dubious title, because it is unclear what will happen to the city if the oil runs out, or if there is a drop in demand.  I can't answer this question. I can only point out an interesting tendency for Surgut - a "historical flickering"... 400 years ago, when the city had just been founded, it served as a staging post for the detachments that conquered Siberia. Then the conquest ended, and the city practically disappeared. At the end of the 17th century, it expanded once again - there was fur trapping and rare species of fish were caught in the River Ob. By the end of the 19th century, the city almost vanished in the taiga, but in the 1930s it was reborn once more when the forestry boom began in Siberia. And then oil was found...

According to data from Greenpeace, oil supplies in Siberia will last for another 50 years - and no longer. What will happen to Surgut then? Will it disappear once more?


The article appeared in Russian in the Skt. Petersburg weekly "Delo"

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